Convercent In The News

The Morning Risk Report: Getting Compliance a Seat at the Strategy Table

A first-time survey released last week by Convercent and Ethisphere Institute shows that while the compliance function is gaining in prominence within many organizations, it’s still “falling short of having input on company strategy.” The survey found 41% of respondents said compliance is sometimes involved in setting company strategy, with 22% saying they are regularly involved and 17% saying they are always involved.

The numbers are not surprising and about where they should be at this point in the evolution of the role of compliance within an organization, said Scott Killingsworth, an attorney at Bryan Cave with expertise in compliance and governance issues. One reason some chief compliance officers are getting invited to strategy meetings is many of them have come from the legal department, are “people with clout, so they do get to go into those meetings,” said Mr. Killingsworth. “I’ve worked with a number of chief compliance officers who used to be the No. 2 person in the general counsel’s office and now they are the chief compliance officer. They may have a reporting relationship that’s changed but part of their clout is they are a senior lawyer in the organization.”

For those CCOs still looking for a way into the strategy meetings, Mr. Killingsworth suggests they try a more subtle approach of interacting with senior leadership. A lot of strategy influence can be exerted when people “are called into someone’s office with a group of people to say ‘Let’s talk about this,’” he said. “It happens in an informal way. That’s where a lot of influence takes place.” Companies that involve compliance early in the strategy process will benefit, especially when it comes to major actions such as acquisitions or mergers, said Mr. Killingsworth. “The worst thing that happens to chief compliance officers and in-house lawyers is when a deal gets 90% down the road and they call you in and you become the ‘Department of No,’” he said. “Whereas, if you are in from the start you have a chance…to foresee what compliance risks are and put in some protections and some cautions early on.”

EXCLUSIVE ON RISK AND COMPLIANCE JOURNAL

Brazil slides in TI index. Days after Brazil’s president backed an anti-corruption probe that has rocked her government, the country was dealt a fresh blow when a global anti-graft group said it was the biggest decliner in an annual index. Transparency International, the global anti-corruption group, said Wednesday in its latest edition of the annual Corruption Perceptions Index that Brazil’s score dropped five points, to 38 out of 100, sending the country’s ranking down to 76th out of the 168 nations ranked in the 2015 edition.

Law firm says U.S. privacy matches EU. Privacy protections for individuals in the U.S. are equal to or greater than those offered in the European Union, despite suggestions otherwise following the invalidation of the Safe Harbor data transfer agreement, a new report from law firm Sidley Austin argues.

U.S. eases Cuba sanctions. The U.S. announced further easing of its Cuba sanctions regulations, as Washington and Havana continue a warming of relations. The changes, which go into effect Wednesday, remove existing payment restrictions for authorized exports to Cuba, and they establish a licensing policy for exports of items that meet the needs of the Cuban people, including to Cuban state-owned enterprises, according to a statement. The changes also expand the authorizations under which Americans can travel to Cuba.

COMPLIANCE

Canada to lift Iran sanctions. Canada said Tuesday it would lift most of its sanctions against Iran, arguing that keeping the penalties in place while other countries ended theirs would only hurt Canadian companies, the WSJ reports. Canada’s move came after the European Union on Jan. 16 lifted sanctions against Iran in return for Tehran’s implementation of key restrictions on its nuclear program. The U.S. still has a number of sanctions in place.

Banks wary of Iran business. A week after the lifting of sanctions against Iran, major European banks are still reluctant to handle Iranian payments as they remain wary of being the first to test the reaction of U.S. authorities, The Guardian reports. Despite guidance issued by the U.S. treasury aimed at reassuring Europe that it was permissible to do business with Iran, excluding a number of entities and individuals that remain blacklisted, the continent’s big banks still err on the side of caution.

White warns on tech valuations. Slumping valuations for once-hot technology companies after they go public are drawing increased scrutiny from U.S. regulators, Bloomberg reports. Securities and Exchange Commission Chair Mary Jo White expressed concerns that some stock brokers may be painting too-rosy of a picture of private tech companies. Anytime there is a “significant” change in how much a company is worth after an initial public offering, it raises questions about the impact on investors who purchased unlisted shares, White said Tuesday.

Brazil charges JBS chairman. Brazilian federal prosecutors charged the chairman of JBS, Joesley Batista, with “crimes against the financial system” Tuesday, sparking a selloff in the shares of the world’s largest meatpacker, the WSJ reports. The charges are in connection with Mr. Batista’s job as head of JBS’s controlling company, J&F Investimentos SA. Prosecutors said he was involved in a transaction intended to circumvent a Brazilian law prohibiting loans from one financial entity to its owners. In an emailed note, J&F said neither JBS nor any of its executives are in any way involved.

Brazil judge bars Petrobras deal. A Brazilian federal judge this week blocked the 1.9 billion reais ($469 million) sale of a minority stake in a subsidiary of state-run oil firm Petró leo Brasileiro SA to a Japanese conglomerate, further complicating an asset sale process that is essential for Petrobras’ efforts to get back on sound financial footing, the WSJ reports. A judge in the northern state of Bahia ruled Monday that the sale of Petrobras’ 49% stake in natural-gas distribution unit Gaspetro to Japan’s Mitsui & Co. should be halted because the deal didn’t meet certain transparency requirements, and because of worries that Petrobras may be repeating some of the actions that led to a massive corruption scandal.

Argentina names financial crimes head. Argentine President Mauricio Macri on Tuesday appointed a former International Monetary Fund official to head Argentina’s financial crimes agency, in a move that aims to bolster the country’s contribution to the global fight against money laundering and drug trafficking and to improve the agency’s relations with its counterpart in the U.S., the WSJ reports. Mariano Federici, the agency’s new head, said a priority for the agency is to restore full ties with the U.S. Treasury Department, which has its own financial crimes agency, the Financial Crimes Enforcement Network, or FinCEN.

Chicago official convicted over bribery. A former Chicago transportation official was found guilty Tuesday in a bribery scheme tied to Chicago’s controversial red-light camera program, the WSJ reports. A jury found John Bills, former assistant transportation commissioner, guilty of fraud, bribery and extortion charges for receiving hundreds of thousands of dollars in cash and perks in exchange for helping Redflex Traffic Systems Inc. build Chicago’s red-light ticketing system into the one of the largest in the nation.

FCC to propose new rules for set-top boxes. Federal regulators soon are expected to propose overhauling rules for television set-top boxes, a move aimed at lowering bills for cable viewers and providing more access to Internet-based programming, the WSJ reports. The proposal by Tom Wheeler, chairman of the Federal Communications Commission, likely would involve giving cable and satellite customers more choice in whether to use their service provider’s set-top box and cable app, or instead choose competing devices and apps, according to consumer advocates pushing for the change.Pay-TV

Takata to recall 5 million air-bags. U.S. auto safety regulators said Tuesday that air bag maker Takata Corp declared 5.1 million U.S. vehicles defective, as the company disclosed an 11th death could be linked to a faulty airbag.

GOVERNANCE

Activists build stakes in United. Altimeter Capital, a hedge fund that previously expressed concerns about United Continental Holdings, formally reported an activist position in the airline, the WSJ reports. Altimeter said it is working with fellow United shareholder PAR Investment Partners. The two firms reported a combined 5.5% stake in the airline and said they had held talks with the company over its direction. United said in an emailed statement that “we actively engage in dialogue with our shareholders, and welcome their constructive suggestions and feedback” and added the company is “committed to acting in the best interests of our shareholders.”

RISK

RBS warns of loss tied to regulatory costs. Royal Bank of Scotland Group PLC on Wednesday warned it would slump to yet another full-year loss after it put aside £2.5 billion ($3.59 billion) to cover a slew of regulatory issues, including a looming settlement with U.S. authorities over the sale of mortgage-backed securities, the WSJ reports. The 73% U.K. government-owned bank is continuing to trudge through a range of legal problems built up over the years. The provisions detailed Wednesday will show up in its full-year 2015 earnings expected late next month.

OPERATIONS

Lyft settles action over worker status. Ride-hailing service Lyft has agreed to settle a proposed class action lawsuit in California by giving drivers additional workplace protections but without classifying them as employees, removing a major threat to its business model, Reuters reports. The settlement agreement, filed late on Tuesday in San Francisco federal court, provides for Lyft to pay $12.25 million, as well as give drivers notice if they are to be deactivated from the platform and other benefits.

STRATEGY

Toyota mulls deal to keep top spot. Toyota Motor Corp. is considering taking full control of small-car maker >Daihatsu Motor, which could cost it around $3 billion, in a move to bolster its position as the world’s biggest auto maker, the WSJ reports. Toyota said Wednesday it sold 10.15 million vehicles world-wide in 2015, outselling rivals General Motors and Volkswagen. Toyota’s sales declined 0.8% from 2014 because growth in the U.S. couldn’t offset slowdowns in Japan, Southeast Asia and Russia.

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